Tag: Gold

However, we are pretty capable of choosing that kind of human capital which aims for the sky.

After weeding out the fraudsters, we go ahead and align ourselves with stellar managements.

Choice of management is one of the top three criteria while selecting a stock.

Why?

One doesn’t wish to be in a stock with a lack-lustre, dull and boring management which has stagnated and has no creativity.

One wants one’s management to be actively pursuing the prime goal of finding means to beat inflation.

Equity is perhaps the only asset class that promises to beat inflation, in case a management uses its intelligence.

That is what good human capital is doing for us all the time, i.e. finding means to beat inflation and maximise profits.

Inflation is something that eats into our assets, and at a rather alarming rate too.

Gold, cash, real-estate, fixed-deposits, bonds and other similar asset classes have no choice but to take the hit. The returns they give us in reality can well be negative, with the exception of real-estate and bonds sometimes. However, here, even the real positive returns are expressed after deducting the effects of inflation, and they don’t amount to much, and we’re not really looking at double digits at all after inflation has done its work.

Equity, on the other hand, tells a different story.

It suffices to to sum up the case of equity by saying that this asset class gives inflation adjusted returns.

How?

Managements tear their brains apart to find ways to circumvent the effects of new laws, tariffs, duties, levies, taxes, natural events, unexpected circumstances etc. and the like to try and achieve a commendable balance sheet by the end of the financial year.

What is inflation?

Exactly this.

Inflation is the sum of all the effects of new laws, tariffs, duties, levies, taxes, natural events, unexpected circumstances etc. and the like on your asset class, and the result that it causes is the diminishing of the value of your asset class.

Managements thus take inflation head-on, and are constantly devising ways to come out with a stellar performance despite the sum total that we refer to as inflation.

Because we have chosen to align ourselves with stellar managements that already have a commendable track record in taking inflation head-on and beating it, our assets are ideally positioned to show inflation-adjusted positive returns, year upon year upon year, and perhaps even double digit ones.

I’ll leave you with some hard cold facts.

Adjusted for inflation, gold has yielded 1% per annum compounded since the history of its existence.

Adjusted for inflation, bonds, cash and fixed deposits are yielding negative returns, and have been doing so for a long time now.

Adjusted for inflation, and after taking the black money component out, real-estate has yielded single-digit returns, per annum compounded.

Adjusted for inflation, all-time equity, including all stocks that don’t exist anymore, has yielded 6% per annum compounded.

Adjusted for inflation, all-time equity, not including stocks that don’t exist anymore, has yielded 11% per annum compounded.

Adjusted for inflation, an intelligently chosen portfolio is extremely capable of yielding 15%+ per annum compounded over a period of 10 years or more.

What more can one want from an asset class?

Go for it, do super due diligence, choose wisely, enter in a proper manner, and build up your long-term portfolio. Master the art of sitting, and you will be in a great position to make double-digit returns, per annum compounded, adjusted for inflation.

Otherwise, 83). it is sold when you no longer believe in the stock concerned, for strong fundamental reasons. Or, it is sold when something more interesting comes along, and your magic number is capped. Then you sell the stock you’re least interested in and replace it with the new one.

84). Attitudes of managements can change with changing CEOs. Does a new management still hold your ideology-line?

Is the annual report flashy, wasteful, rhetorical and more of an eyewash? Or, 85). is it to the point with no BS? Same scrutiny is required for company website.

Your winners 86). try to entice you to sell them and book profits. Don’t sell them without an overwhelming reason.

Your mind will 87). try and play tricks on you to hold on to a now-turned-loser that is not giving you a single good reason to hold anymore.

If you’re not able to overcome your mind on 87)., 88). at least don’t average-down to add more of the loser to your folio.

2). Debt – Study the underlying very thoroughly. Reject 10 underlyings. Take up the 11th which passes all criteria. Be happy with a slightly better than FD-return. Done.

3). Equity – Invest for life. Study till you drop the stock or take it up. Only invest in what meets all criteria and offers margin of safety at time of investing. On top of that – SIP (systematic investment plan). Done.

4). Forex – Get a software robot to trade it for you. Or some human-capital. All available online. Requires a bit of fine-tuning. Keep tuning till you start making a return. Done.

7). Arbitrage – Understand what this is, and why it gives you a tax benefit. Get an online MF account going with Kotak MF or DWS. Divert some funds into their arbitrage MF, either or. I prefer Kotak. Monthly dividend payout option. Done.

8). Options – Get the option-strategy going. You don’t require a desktop. Mobile is sufficient. All you now need to do is take care of square-off. On mobile. This means a slightly higher level of engagement than the above avenues. Only slightly. Are you ok with that? Fine. Done.